Assume that EasyComp, a computer company operating in a perfectly competitive market
structure, produces affordable, easy-to-use home computer systems. EasyComp has fixed costs
of $250. EasyComp’s marginal cost of producing computers is $700 for the first computer,
$250 for the second, $300 for the third, $350 for the fourth, $400 for the fifth, $450 for the
sixth, and $500 for the seventh. Please respond to the following questions below by drawing on
the three criteria of the empirical and quantitative skills core objective.
a. Please fill in the missing cost values in the table below by drawing on the above given
information and by rounding your calculations to the nearest whole number where you round
numbers of 0.5 and above up and numbers of 0.49 and below down. (criteria: manipulation of
numerical data or observable facts)
Q TC (Total
Cost)
ATC
(Average
Total Cost)
TVC (Total
variable
Cost)
AVC
(Average
Variable
Cost)
MC
(Marginal
Cost)
0 250
1 950 950 700 700 700
2 1200 600 950 475 250
3 1500 500 1250 417 300
4 1850 463 1600 400 350
5 2250 450 2000 400 400
6 2700 450 2450 408 450
7 3200 457 2950 421 500
b. Please state first at what price the break-even point would be and then briefly describe how
you found the break-even point based on values above. (criteria: analysis of numerical data or
observable facts)
c. Please state first at what price the shutdown point would be and then briefly describe how
you found the shutdown point based on the values above. (criteria: analysis of numerical data
or observable facts)
d. If EasyComp sells the computers for $500, please state whether EasyComp is making a profit
or a loss? Next, please describe how large the profit or loss is and show your analysis. (criteria:
analysis of numerical data or observable facts)
e. Sketch a graph with MR, MC, and ATC curves to illustrate your answer and show the profit or
loss. (criteria: manipulation of numerical data or observable facts)
f. Would you advise EasyComp to stay in business or shut down the business based on the
shown profit or loss? Please justify your conclusion! (criteria: informed conclusion)
g. Based on the knowledge gained from the above analysis, what must any future computer
company that wants to enter this perfectly competitive market make sure it can do in order to
be profitable? (criteria: informed conclusion)
h. If the market structure were to change from perfect competition to monopolistic
competition, what would the now monopolistically competitive computer company EasyComp
have to do in order to become more profitable compared to its peer computer companies?
(criteria: informed conclusion)
Sami Afana(1)
APA
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